Central Europe Tax & Legal Highlights

October 2018

Welcome to the Tax & Legal Highlights newsletter. This page provides you with the latest information on tax and legal related issues from around the Central Europe region. For more specific information – choose your country and find out more about local tax practices and news around the region.

Explore Content

Czech Republic

Breakthrough in the Existing Practice? A Company’s Management may be Liable for Additionally Assessed TaxAs our experience suggests, the Financial Administration has been exerting significant pressure on tax collection, which is reflected not only in an actual increase in tax proceeds, but also, for example, in the number of tax seizures ordered. However, the Financial Administration sometimes seeks to collect tax in highly unorthodox ways. One such procedure has been reviewed by the Regional Court in Hradec Králové – Pardubice Office (the “Regional Court”)

Announcing the Czech Republic’s stance towards the EU’s proposals for digital economy taxation The Ministry of Finance has published on its website a brief summary of the Czech Republic’s attitude to the proposals of the European Union concerning the taxation of so-called digital economy.

Approaching deadline for an entry of beneficial owners information in the Beneficial Owners RegisterAn amendment to Act No. 304/2013 Coll., on Public Registers of Legal Entities and Individuals, effective since 1 January 2018, has introduced the Beneficial Owners Register (the “Register”) in which all legal entities recorded in the Commercial Register need to record their beneficial owners by no later than on 1 January 2019. Other legal entities recorded in other public registers (including trusts) have to do so by 1 January 2021. What does this duty entail in practice, how complicated is it and what issues may arise?

October Vat news: VAT Act Amendment As the discussion of the technical amendment to the VAT Act has been postponed, it may be expected that the relevant changes (eg, in respect of tax base corrections, VAT reduction in the event of irrecoverable receivables, taxation of bonuses to statutory executives and members of statutory bodies, differentiation of financial and operating leases or taxation of vouchers for the purchase of goods/services) will come into effect on 1 April 2019 at the earliest.

Conceptual changes in provisions regarding vacation time and minimum wage and more than 80 additional proposed changes effective already from 1 July 2019…
...are brought by the draft amendment to the Labour Code presented by the Ministry of Labour and Social Affairs. It is a more modest act compared to the very ambitious but unsuccessful draft from 2016, but it is still worth our attention.

Research and Development Deduction: The Fundamental Ruling The Regional Court in Hradec Králové ruled in favour of the plaintiff (ENERGO CHOCEŇ, s.r.o.), revoking the contested ruling and referring the matter back to the Appellate Financial Directorate for further proceedings.

Hungary

Facts and Myths of PIT and Social SecurityThe significance of 183 days in Hungarian work performance and taxation of non-resident individuals.

Hungarian investments of third country investors will require ministerial approval in strategic sectors from next yearAt its session on 2 October 2018, the Hungarian Parliament adopted Act LVII of 2018 on the Supervision of Third Country Investments Threatening Hungarian Security Interests, which, as of 1 January 2019, may require investors with a registered seat outside EU/EEA member states or Switzerland to obtain ministerial approval for investing in sectors that are supervised by the state for strategic-security reasons as specified in the law. In addition to the public utility sector (electricity, gas, and water management), the new law will affect the financial services, electronic communications and military engineering industries.

Kosovo

Government Introduces New Regulation No. 16/2018 for Customs and Tax Reliefs for disabled personsThis act will bring reliefs for Tax and Customs for employers that employ persons with disabilities as well for persons with disabilities that exercise independent economic activity.

Former-Yugoslavia Agreement for Double Tax Elimination with Belgium under renegotiationIn principle, the Ministry of Finance got the approval for the initiative of renegotiation of the Double Tax Agreement with Belgium.

Double Tax Treaty between Kosovo and Switzerland Enters into ForceThe Double Tax Treaty between Kosovo and Switzerland has been ratified by the legislatures of both respective parties and is applicable as from 1st January 2019.

Lithuania

Rules for trade in electricity were amended The rules were amended by implementing the law adopted by the Seimas recognizing the threat of Astravyets nuclear power plant (NPP) under construction in Belarus to the national security of the state, environment and public health. The law sets out the prohibition for electricity from third countries with unsafe NPP to enter the Lithuanian electricity market.

Changes in insolvency proceedings of legal entitiesThe Government approved the draft law that reforms the regulation of the insolvency of legal entities, with an aim to create a favorable and competitive environment for business and investment, to consolidate the legal regulation of legal entities restructuring and bankruptcy, to increase the efficiency insolvency processes and to reduce losses incurred by creditors.

A new model for the development of renewable energy was approved On the 3d of October, the Government approved the amendments to the Law on Renewable Energy, which establishes a new support model for encouraging power plants to generate energy from RES. This will enable to further development of renewable energy, which is one of the key goals of the national strategy on energy.

It is sought to facilitate the formation and restructuring procedures of land parcelsThe Ministry of Economy has proposed a simplification to facilitate the formation and restructuring procedures of land parcels in free economic zones (FEZ) and industrial parks (IE) in both urban and rural areas.

Poland

Mandatory reporting of tax-planning schemesThe amendment to Polish tax provisions adopted by Polish Parliament on 26 October 2018 introduces into the Polish Tax Ordinance Act mandatory reporting of so-called tax-planning schemes (Mandatory Disclosure Rules – MDR). The amendment imposes new obligations not only on advisors (attorneys-at-law, legal counsels, tax advisors), but also on their clients.
The amended provisions are to enter into force on 1 January 2019, but tax-planning schemes will have to be disclosed retroactively if the first activity related to implementation of the given scheme was performed after 25 June 2018 (cross-border schemes) or after 1 November 2018 (domestic schemes)

New changes in income taxes and the Tax Ordinance on the wayThe draft of significant changes in tax regulations planned from January 1, 2019.
In the autumn of 2017, we signaled that as a result of legislative initiative of the Ministry of Finance, tax regulations will undergo fundamental transformations from January 1, 2018 when the largest amendment to the Corporate Income Tax was to come into force. Recent weeks show that January 1, 2018 was not the end of fundamental changes of tax regulations. Subsequent bills, designed to significantly change tax regulations from January 1, 2019 were published by the Ministry of Finance at the end of the summer holidays. These projects concerned not only the income tax from legal persons, but also transfer pricing and the Tax Ordinance. After further modifications, on September 25, 2018 these projects were addressed to legislative work in the Parliament (hereinafter: "Amendment”).

Romania

New rules governing the financial insurance sectorOn October 1st, 2018 the Law no. 236/2018 on insurance distribution entered into force. The law transposes the provisions of Directive (EU) 2016/97 and repeals Law no. 32/2000 on the activity and supervision of intermediaries in insurance and reinsurance.
The regulations issued by the Financial Supervisory Authority (FSA) prior to October 1st, 2018 will continue to apply until the new regulations will be enacted, except for contradictory provisions, where Law no. 126/2018 shall prevail. The FSA is expected to issue in the near future implementation rules for the application of the Law no. 236/2018.
We summarized below some of the key aspects provided by Law no. 236/2018.

Amendments to Tax Code – The final form of the lawThe amendments to the Tax Code proposed by the draft emergency ordinance of 29 September 2018 were published in the Official Gazette. The most relevant are: 5% VAT rate to certain services, regulations for taxpayers applying IFRS and updates on the applicable deductions for early reporting and/or payment of income tax and social contributions.

Starting January 1st, 2020, foreign companies will not be able to perform more than 3 customs operations per year, unless they are established in the European Union A draft amendment of Order no. 2460/2016 on customs representation norms was published on the Romanian General Customs Directorate website.

The Combined Nomenclature in force in 2019 The European Commission has published the Combined Nomenclature (“CN”) applicable starting January 1st, 2019. Consequently, starting January, you will need to use the new CN codes for customs and excise operations, Intrastat declarations and for operations performed on the basis of a customs and fiscal authorizations issued on CN 2018 tariff codes.

Excisable products: On December 31, 2018 certificates for engross trading of energy products and alcoholic beverages/processed tobacco with no storage will lose their validityAccording to a draft order published on the website of the General Customs Directorate, the deadline for economic agents to re-authorize under the new conditions will be extended (initially the re-authorization deadline was set for November 9, 2018).

Serbia

Treaties for the Avoidance of Double TaxationTreaty for the Avoidance of Double Taxation with San Marino entered into force

Rulebook on recognized expenditures for investments in the field of cultureMinister of Culture and Information has adopted Rulebook on investments in the field of culture recognized as expenditure (hereinafter: “Rulebook”), related to application of Corporate Income Tax Law.

Slovakia

Information on the Issuance of a Tax Residence Certificate to Taxable Persons with Unlimited Tax Liability in the Slovak RepublicThe Financial Directorate of the Slovak Republic published information on the issuance of tax residence certificates to taxable persons with unlimited tax liability.

The Government’s Amendment to Act No. 222/2004 Coll. on Value Added Tax, as AmendedThe Ministry of Finance of the Slovak Republic submitted a draft amendment to the VAT Act effective from 1 January 2019. The draft amendment to the VAT Act will be discussed by the relevant committee of the National Council of the Slovak Republic.

Get in touch

Partner | Tax

Kristine Jarve joined Deloitte Latvia as Partner of Baltic Tax, Legal and BPO practice in August 2015. Kristine has over 15 years of professional experience. For more than 10 years she was working for... More

Partner | Tax

Janis is a Partner of the Tax department of Deloitte Latvia. Janis has a wide range of practical experience in international and Latvian taxation matters with a focus on both local, and cross border t... More

Senior Manager | Tax

Aija Klavinska is a Senior Tax Manager at Deloitte Latvia. Dealing with various tax questions for more than 14 years she has excellent knowledge of Latvian tax system and specializes in corporate inco... More

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see About Deloitte for a detailed description of DTTL and its member firms.